<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 1-8183
SUPREME INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-1670945
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
65140 U.S. 33 East, P.O. Box 237, Goshen, Indiana 46528
(Address of principal executive offices)
Registrant's telephone number, including area code:(219) 642-3070
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock ($.10 Par Value) Outstanding at November 4, 1997
Class A 8,435,156
Class B 1,473,124
The index to Exhibits is at page 13 in the sequential numbering system.
Total number of pages: 14.
Page 1 of 14
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SUPREME INDUSTRIES, INC.
CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets 3 & 4
Consolidated Statements of Income 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7 & 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8,9 & 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Index to Exhibits 13
Page 2 of 14
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Part I. Financial Information
Item 1. Financial Statements
Supreme Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
September 30, December 31,
1997 1996
------------- ------------
Assets (Unaudited)
Current assets:
Cash and cash equivalents................ $226,320 $220,678
Accounts receivable, net................. 18,401,421 16,556,258
Inventories.............................. 23,951,731 21,208,707
Deferred income taxes.................... 1,043,066 1,043,066
Other current assets..................... 457,705 423,237
------------- ------------
Total current assets.................. 44,080,243 39,451,946
------------- ------------
Property, plant and equipment, at cost..... 43,574,615 40,675,873
Less, Accumulated depreciation and
amortization........................ 15,881,755 14,246,236
------------- ------------
Property, plant and equipment, net.... 27,692,860 26,429,637
Intangible assets, net..................... 1,756,212 1,908,694
Other assets............................... 1,045,699 1,038,747
------------- ------------
Total assets.......................... $74,575,014 $68,829,024
============= ============
The accompanying notes are a part of the consolidated financial statements.
Page 3 of 14
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Supreme Industries, Inc. and Subsidiaries
Consolidated Balance Sheets, Concluded
September 30, December 31,
1997 1996
------------- ------------
Liabilities and Stockholders' Equity (Unaudited)
Current liabilities:
Current maturities of long-term debt....... $2,582,825 $2,355,955
Trade accounts payable..................... 8,099,478 6,778,942
Accrued income taxes....................... 805,077 959,240
Other accrued liabilities.................. 6,968,540 5,914,315
------------ ------------
Total current liabilities............... 18,455,920 16,008,452
Long-term debt............................... 12,639,401 16,108,780
Deferred income taxes........................ 890,234 890,234
------------ ------------
Total liabilities....................... 31,985,555 33,007,466
------------ ------------
Stockholders' equity:
Class A Common Stock, $.10 par value....... 884,964 801,277
Class B Common Stock, convertible into
Class A Common Stock on a one-for-one
basis, $.10 par value.................... 154,678 140,297
Additional paid-in capital................. 31,726,397 23,901,587
Retained earnings.......................... 10,073,956 11,228,933
Treasury stock, at cost.................... (250,536) (250,536)
------------ ------------
Total stockholders' equity.............. 42,589,459 35,821,558
------------ ------------
Total liabilities and stockholders'
equity................................ $74,575,014 $68,829,024
============ ============
The accompanying notes are a part of the consolidated financial statements.
Page 4 of 14
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Supreme Industries, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------- ----------- ------------ ------------
1997 1996 1997 1996
----------- ----------- ------------ ------------
Revenues................. $45,691,254 $38,813,812 $146,140,460 $121,364,162
Costs and expenses:
Cost of sales.......... 38,648,059 32,463,802 121,564,238 101,438,274
Selling, general and
administrative....... 3,909,345 3,852,095 12,328,511 11,388,268
Interest............... 299,194 367,429 1,062,419 1,148,212
----------- ----------- ------------ ------------
42,856,598 36,683,326 134,955,168 113,974,754
----------- ----------- ------------ ------------
Income before
income taxes...... 2,834,656 2,130,486 11,185,292 7,389,408
Income taxes............. 1,134,000 890,000 4,468,000 3,083,000
----------- ----------- ------------ ------------
Net income.......... $1,700,656 $1,240,486 $6,717,292 $4,306,408
=========== =========== ============ ============
Earnings per share:
Primary............. $.16 $.12 $.64 $.42
Fully diluted....... .16 .12 .64 .42
Weighted average number
of shares of common
stock and common stock
equivalents:
Primary............. 10,454,538 10,421,366 10,441,359 10,215,453
Fully diluted....... 10,456,272 10,421,366 10,453,664 10,366,122
The accompanying notes are a part of the consolidated financial statements.
Page 5 of 14
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Supreme Industries, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended
September 30,
-------------------------
1997 1996
------------ ------------
Cash flows from operating activities:
Net income................................. $6,717,292 $4,306,408
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortizatization...... 2,092,984 1,607,995
Gain on disposal of equipment.......... 11,679 (9,251)
Changes in operating assets and
liabilities.......................... (2,402,057) (1,219,638)
------------ ------------
Net cash provided by operating
activities............................. 6,419,898 4,685,514
------------ ------------
Cash flows from investing activities:
Additions to property, plant and
equipment................................ (3,268,554) (6,320,438)
Proceeds from disposal of property, plant
and equipment............................ 53,150 13,305
Increase in other assets................... (6,952) (391,948)
------------ ------------
Net cash (used in) investing activities.. (3,222,356) (6,699,081)
------------ ------------
Cash flows from financing activities:
Proceeds from revolving line of credit
and other long-term debt.............. 58,559,938 54,390,596
Repayments of revolving line of credit
and other long-term debt.............. (61,802,447) (53,264,285)
Proceeds from exercise of stock options
and warrants............................. 50,609 891,305
------------ ------------
Net cash provided by (used in) financing
activities............................. (3,191,900) 2,017,616
------------ ------------
Increase in cash and cash equivalents........... 5,642 4,049
Cash and cash equivalents, beginning of period.. 220,678 106,740
------------ ------------
Cash and cash equivalents, end of period........ $226,320 $110,789
============ ============
Noncash investing and financing activities:
5% Common Stock Dividend - November 1997... $4,486,549 ----
5% Common Stock Dividend - May 1997........ 3,385,720 ----
Exchange of warrants for Class A Common
Stock.................................... ---- 3,051,930
Conversion of convertible notes to shares
of Class A Common Stock.................. ---- 1,134,428
Conversion of Class B Common Stock to
Class A Common Stock..................... ---- 39,868
The accompanying notes are a part of the consolidated financial statements.
Page 6 of 14
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SUPREME INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION AND OPINION OF MANAGEMENT
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do
not include all of the information and financial statement disclosures
necessary for a fair presentation of consolidated financial position,
results of operations and cash flows in conformity with generally accepted
accounting principles. In the opinion of management, the information
furnished herein includes all adjustments necessary to reflect a fair
statement of the interim periods reported. All adjustments are of a normal
and recurring nature. The December 31, 1996 consolidated balance sheet data
was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
NOTE B - INVENTORIES
Inventories, which are stated at the lower of cost or market with cost
determined on the first-in-first-out method, consist of the following:
September 30, December 31,
1997 1996
------------- ------------
Raw materials................. $ 13,063,097 $ 12,076,089
Work-in-progress.............. 3,143,742 3,138,668
Finished goods................ 7,744,892 5,993,950
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$ 23,951,731 $ 21,208,707
The valuation of raw materials, work-in-progress and finished goods
inventories at interim dates is based upon a gross profit percentage method
and bills of materials. The Company has had favorable and unfavorable
adjustments in the third and fourth quarters resulting from the annual
physical inventories. The Company is continuing to refine its costing
procedures for valuation of interim inventories in an effort to minimize the
annual book to physical inventory adjustments.
NOTE C - INCOME TAXES
The effective income tax rates for the three and nine months ended
September 30, 1997 were 40.0% and 39.9%, respectively, compared to 41.8% and
41.7% for the three and nine months ended September 30, 1996. The decreases
are attributable to the Company's higher levels of income decreasing the
impact of items treated differently for financial statement purposes and
income tax return purposes and improved operations of the Company's Honduran
subsidiary, which is operating in a government tax free zone.
Page 7 of 14
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SUPREME INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONCLUDED.
NOTE D - STOCK DIVIDEND
On May 1, 1997, the Board of Directors declared a 5% common stock dividend
payable on May 19, 1997, to shareholders of record on May 12, 1997. On
October 29, 1997, the Board of Directors declared an additional 5% common
stock dividend payable on November 17, 1997 to shareholders of record on
November 10, 1997. Earnings per share and weighted average shares
outstanding have been restated to reflect the 5% stock dividends for all
periods presented.
NOTE E - RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." The Company is required to initially adopt this pronouncement for
the periods ending December 31, 1997, and will be required to then restate
all prior periods presented to conform with the new standard. SFAS No. 128
will require the Company to make a dual presentation of basic and diluted
earnings per share on the face of its consolidated statementof income instead
of primary and fully diluted earnings per share. The Company has not
determined the impact SFAS No. 128 will have on historically reported
earnings per share.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" both of which the Company will be required to adopt in its
financial statements for the year ending December 31, 1999. SFAS No. 130
will require the Company to report comprehensive income in its financial
statements. Comprehensive income includes net income and certain
transactions that are reported as a separate component of stockholder's
equity. SFAS No. 131 specifies revised guidelines for determining
operating segments and the type and level of information to be disclosed.
The Company has not yet determined what changes in its disclosures, if any,
will be required by SFAS No. 131.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations
Revenues for the three months ended September 30, 1997 increased $6.9 million
to $45.7 million from $38.8 million for the three months ended
September 30, 1996. Revenues for the nine months ended September 30, 1997
increased $24.7 million to $146.1 million from $121.4 million for the nine
months ended September 30, 1996.
Page 8 of 14
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Both primary and fully diluted earnings per share increased four cents to
$.16 for the quarter ended September 30, 1997 from $.12 for the quarter
ended September 30, 1996. Both primary and fully diluted earnings per share
increased $.22 to $.64 for the nine months ended September 30, 1997.
Earnings per share for all periods presented have been restated to reflect
the 5% stock dividend declared in May and October 1997 (See Note D of Notes
to Consolidated Financial Statements).
Revenue increases for both the three months and nine months ended
September 30, 1997 were concentrated in the Company's dry freight product
lines and the StarTrans (trademark) Bus product lines. Sales of dry freight
units shipped increased 16% for the quarter and 20% for the nine months ended
September 30, 1997. Sales of StarTrans (trademark) units shipped increased
47% for the quarter and 42% for the nine months ended September 30, 1997.
Revenues increased for both the three months and nine months ended
September 30, 1997 at each of the Company's regional manufacturing facilities
with the largest increases occurring in Indiana and Pennsylvania.
The Company's gross profit percentage decreased 1% to 15.4% for the three
months ended September 30, 1997 from 16.4% for the three months ended
September 30, 1996. Increased direct labor was responsible for the decline
in gross profit. The increase is attributable to the following: (1) labor
incurred at four of the Company's production facilities to take the annual
physical inventories, both production and sales were lost during the shut
down for the physical inventory, (2) Start-up and training of initial
production runs on three new labor intensive product lines (armored trucks,
trolleys and service vans). Manufacturing overhead expenses declined 1.1%
and 1.3% as a percentage of revenues for the three months and nine months
ended September 30, 1997 from the comparable prior year periods, which
generally occurs with increased sales volume. Raw material costs for both
the three months and nine months ended September 30, 1997 were within .5% of
the prior year comparable periods.
Selling, general and administrative expenses as a percentage of revenues
declined to 8.6% and 8.4% for the three months and nine months ended
September 30, 1997, respectively, from 10.0% and 9.4% for the comparable
prior year periods. The decrease in the percentages is the result of
increased sales volumes.
Interest expense declined to $299,194 for the three months ended
September 30, 1997 from $367,429 from the prior year comparable quarter and
to $1,062,418 for the nine months ended September 30, 1997 from $1,148,212
for the comparable prior year period. Interest expense for the nine months
ended September 30, 1996 was reduced by $.2 million for interest capitalized
in accordance with Statement of Financial Accounting Standards No. 34.
Page 9 of 14
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The Company has entered into a contract to purchase software that will enable
it to handle transactions in the year 2000, process more efficiently the
increased volume of transactions as well as provide better operating
information. The Company's management personnel have begun training on the
new software and anticipates a successful implementation in advance of the
year 2000.
Liquidity and Capital Resources
Cash flows from operations was adequate to finance operations, reduce debt
and provide for capital expenditures during the nine months ended
September 30, 1997. Net income of $6.7 million and depreciation and
amortization of $2.1 million were the primary factors contributing to
positive cash flow. The increases in accounts receivable of $1.8 million
and inventories of $2.7 million were a result of the increases in revenue
for both the three months and nine months ended September 30, 1997. Both
days sales outstanding and inventory turn improved slightly when compared
to the period ended September 30, 1996. The increase in inventories was
partially financed by a $1.1 million increase in accounts payable.
The major investing activities for the nine months ended September 30, 1997
were the acquisition of plant and equipment to increase the Company's
capacity in response to greater demand for existing and new product lines.
The major additions completed during the nine months were a new paint
facility, production tooling for proprietary parts and improved laminating
capabilities all in Goshen, Indiana. The Company also upgraded its paint
facility in Jonestown, Pennsylvania. In anticipation of continued increased
demand for the Company's existing and new products further expansion has
begun in Goshen, Indiana; Jonestown, Pennsylvania; Cleburne, Texas and
Griffin, Georgia. The increased capacity will be available early in 1998.
The approximate $3.0 million of planned capital expenditures will be
financed through operating cash flow and use of the revolving credit facility.
For the nine months ended September 30, 1997, the Company has reduced
long-term debt by $3.2 million as a result of strong operating cash flows.
The Company believes cash flows from operations and amounts available under
its revolving line of credit will be sufficient to finance operations during
the balance of 1997 and the next fiscal year.
Page 10 of 14
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits:
Exhibit 11-Statement Regarding Computation of Per
Share Earnings
b) Reports on Form 8-K: None
Page 11 of 14
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUPREME INDUSTRIES, INC.
DATE: November 12, 1997 BY: /s/ROBERT W. WILSON
Robert W. Wilson
Executive Vice President,
Treasurer, Chief Financial
Officer and Director
(Principal Financial and
Accounting Officer)
(Signing on behalf of the
Registrant and as Principal
Financial Officer.)
Page 12 of 14
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INDEX TO EXHIBITS
Exhibit No. Description Page
11 Statement Regarding Computation of Per Share
Earnings 14
Page 13 of 14
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EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
SUPREME INDUSTRIES, INC. AND SUBSIDIARIES
(Amounts in thousands, except per share data)
Nine Months
Ended September 30,
1997 1996
PRIMARY
Weighted average shares outstanding 10,358 9,709
Net effect of dilutive stock options and
warrants - based on the treasury stock
method using average market price 83 367
Net effect of subordinated convertible
notes --- 139
------- -------
TOTAL 10,441 10,215
======= =======
Net income $ 6,717 $ 4,306
======= =======
Net income per share $ .64 $ .42
======= =======
FULLY DILUTED
Weighted average shares outstanding 10,358 9,709
Net effect of dilutive stock options and
warrants - based on the treasury stock
method using the period-end market price,
if higher than the average market price 96 367
Dilutive effect of subordinated convertible
notes --- 290
-------- --------
TOTAL 10,454 10,366
======== ========
Net income $ 6,717 $ 4,306
Interest expense reduction due to assumed
conversion of subordinated convertible
notes - net of tax --- 23
-------- --------
Net income as adjusted $ 6,717 $ 4,329
======== ========
Net income per share $ .64 $ .42
======== ========
Note: The above share and per share data have been restated for the
5% stock dividends declared on May 1, 1997 and October 29, 1997.
Page 14 of 14
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 226,320
<SECURITIES> 0
<RECEIVABLES> 18,831,421
<ALLOWANCES> 430,000
<INVENTORY> 23,951,731
<CURRENT-ASSETS> 44,080,243
<PP&E> 43,574,615
<DEPRECIATION> 15,881,755
<TOTAL-ASSETS> 74,575,014
<CURRENT-LIABILITIES> 18,455,920
<BONDS> 12,639,401
<COMMON> 1,039,642
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 74,575,014
<SALES> 146,140,460
<TOTAL-REVENUES> 146,140,460
<CGS> 121,564,238
<TOTAL-COSTS> 121,564,238
<OTHER-EXPENSES> 12,328,511
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,062,419
<INCOME-PRETAX> 11,185,292
<INCOME-TAX> 4,468,000
<INCOME-CONTINUING> 6,717,292
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,717,292
<EPS-PRIMARY> 0.64
<EPS-DILUTED> 0.64
</TABLE>
